4 Popular Foreign Government Bonds

At a time when the U.S. Treasury has already dropped rates to record lows and Treasury bonds have continually dropped in value, foreign government bonds appear increasingly attractive to U.S. investors. On the one hand, many foreign governments are not in as much debt as the United States. They additionally appear to have more stable currency than the U.S. Dollar, which has experienced a high degree of volatility. Since these foreign governments still have room to drop their rates which have not yet hit record lows, the potential for profits is high. But just how safe are these investments? That much is till up for interpretation.

#1 British Bonds

Britain is not far better off than the U.S. in the face of the global recession of the last 2000s. In fact, the government issued over 200 billion in bonds in 2009 to cover for the stimulus programs employed in the country. The result, much like the result in the U.S. bond market, was a decrease in government bond prices and profits. British bond investments are not likely to offer a large advantage over American bond investments at this point in time. Of course, this can change as the markets recover from the recession.

#2 German Bonds

Germany is a developed nation with the largest economy currently operating on the Euro, a currency which has continued to grow its power since its inception. In fact, many European nations feel Germany is the kind of the Euro. Its bond have a strong credit rating and high yield, making them an attractive option for international investors. Many advisers recommend purchasing German or French bonds if you are seeking a moderately profitable but extremely secure foreign bond market.

#3 Other European Bonds

If you are looking to Europe exclusively for bond purchases, you will want to steer clear of any number of the European markets with a decreased credit rating. Many of these countries have experienced a worse recession than the U.S. Greece, for example, is dealing with a huge amount of national debt. Check two items when considering European bond markets: the strength of a central bank and the credit rating of the government bonds. In 2008-2009, Standard & Poor's dropped the rating of a record number of international government bonds, close to 20 in 2008 and many more in 2009.

#4 Emerging Markets Bonds

Emerging markets can be a trendy but often misunderstood term. Not all depressed or third world countries should be considered "emerging markets." Rather, those nations that have developed an infrastructure over the past few decades but have yet to develop the economy to fill out this infrastructure qualify. They are poised for large growth in the coming decades. Two examples are Russia and Brazil. Both have posted solid growth in their bond prices over the past few years, and both have credible central banks, eliminating the possibility of large-scale default on the bonds. The PowerShares Emerging Markets Sovereign Debt exchange- traded fund, a fund that uses only bonds from emerging market economies, posted 20 percent growth in 2008.

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